What Should Celgene Shareholders Do In Light Of The Bristol-Myers Squibb Deal?

Jan. 04, 2019 8:51 AM ETBristol-Myers Squibb Company (BMY), CELG87 Comments

Summary

  • Celgene stock pops 21% as Bristol-Myers Squibb offers to buy it out.
  • What exactly are Celgene shareholders getting?
  • Is it better to buy Celgene or Bristol-Myers now?
  • This idea was discussed in more depth with members of my private investing community, DGI Across North America. Start your free trial today »

As a Celgene (NASDAQ:CELG) shareholder, I was happy to find the stock up for a change, after the stock fell about 38% last year (and from the peak of $145 in 2017, it has fallen about 55%).

The stock appreciated about 21% as of writing, as there was news that Bristol-Myers Squibb (NYSE:BMY) was acquiring Celgene for about $74 billion.

medical drugs looking cool in mid-air

What's The Deal?

If the transaction closes, Celgene shareholders will get one BMY share and $50 in cash for each Celgene share. Celgene shareholders will also get one tradeable Contingent Value Right ("CVR") for each share of Celgene, which will entitle its holder to receive a one-time potential payment of $9 in cash upon FDA approval of all three of ozanimod (by December 31, 2020), liso-cel (JCAR017) (by December 31, 2020) and bb2121 (by March 31, 2021), in each case for a specified indication.

Based on the closing price of $52.43 BMY stock on January 2, 2019, the cash and stock consideration to be received by Celgene shareholders at closing is valued at $102.43 per Celgene share and one CVR. When completed, Bristol-Myers Squibb shareholders are expected to own about 69% of the company, and Celgene shareholders are expected to own roughly 31%.

However, in light of this news, BMY stock has been dragged down to under $45 per share as of writing. This would value the cash and stock consideration to be received by Celgene shareholders at under $95 per Celgene share and one CVR.

BMY is funding the cash portion of the acquisition with cash on hand and debt financing. It has obtained fully committed debt financing from Morgan Stanley Senior Funding, Inc. and MUFG Bank, Ltd. Following the close of the transaction, BMY expects that substantially all of the debt of the combined company will be pari passu.

DGI Across North America subscribers got more in-depth valuation analyses on CELG and BMY and my commentary on their technical charts.

This article was written by

Value investing in high quality U.S. and Canadian dividend stocks.
I'm primarily a value and dividend investor who has more than 13 years of stock investing experience. After graduating from the University of British Columbia with a BSc in Computer Science, I took university/post-secondary courses in financial markets, finance, financial accounting, and financial planning. I share my findings and ideas on Seeking Alpha, Motley Fool, and Sure Dividend.

I offer an exclusive Marketplace service, DGI Across North America, which maintains two dividend portfolios with monthly top ideas & buy target updates. Also, get real-time trade alerts of my buys and sells!



Disclosure: I am/we are long CELG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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